Oracle resumes construction of massive data center

The move underscores Oracle's big plans for cloud-based software delivery

Oracle has started up work again on a large data center in the Salt Lake City, Utah, area, after suspending the project without public explanation last year.

It is unclear why Oracle had stopped building the center in West Jordan, a Salt Lake City suburb. An Oracle spokeswoman on Friday confirmed a report by The Salt Lake Tribune that work has resumed, but declined additional comment.

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The project is slated to be roughly 240,000 square feet in size, with a potential price tag "very likely" around $285 million, said West Jordan community development director Tom Burdett, via e-mail.

The resumption of construction is a telling indicator of the scope of Oracle's plans for on-demand software, as it comes even after the acquisition of Sun Microsystems and its data centers, including one in the neighboring state of Colorado.

So far, Oracle has just a handful of SaaS (software as a service) business applications, among them its CRM on Demand. It reported $779 million in on-demand revenue during its fiscal 2009, a small fraction of overall sales.

But Oracle's SaaS strategy is set to ramp up this year, with the long-awaited launch of Fusion Applications, a next-generation suite that is supposed to combine the best attributes from its various product lines and feature a BI (business intelligence)-laden user interface.

Oracle's go-to-market strategy for Fusion Applications is carefully crafted to avoid alienating its large installed base of customers on legacy applications. These users won't be placed on an immediate forced march to Fusion Apps, which will be available in on-premises form but is being developed as "SaaS-ready."

The company realizes that customers have a "huge investment and commitment" tied to Oracle-acquired applications such as Siebel and PeopleSoft, CEO Larry Ellison said at last year's OpenWorld conference. Oracle will continue to enhance those product lines "for the next decade and beyond," Ellison said.

Therefore, the Fusion Apps strategy is supposed to appeal not only to customers who desire the latest and greatest Oracle products, but also to these legacy users, who might want to consume Fusion a little at a time, perhaps in SaaS form.

Altimeter Group estimates that Oracle is working on 20 to 30 SaaS products overall, said Ray Wang, a partner with the analyst and advisory firm.

Oracle's CRM (customer relationship management) business is providing key evidence that increased customer demand for SaaS will follow, Wang said. Ninety-two percent of the new Oracle CRM deals Altimeter has seen since January are for the on-demand version, he said.

"A good amount of everything new [at Oracle] is going to go in that direction," he said. "It wouldn't be inconceivable to see 50 percent of Oracle's business in the cloud by 2014."

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